Squid Game Coin — The $2 Trillion Heist
Squid Game was by far the most popular show on Netflix last year, with over 150 million households having watched it — nearly twice that of the number two show, Bridgerton. Only 28 days after Squid Game’s release, it became the most-watched item in Netflix’s history while #SquidGame gained more than 23 billion views on TikTok. Simply put, the world loved it. So much so, that when a new cryptocurrency called ‘Squid Game Coin’ (abbreviated SQUID) promised a play-to-earn game based on the show, investors were more than eager to have a piece of the pie.
Now, this is no rare occurrence: there are always coins being created solely based on trends. Take for example TrumpCoin, PutinCoin, and even Coinye — only a small fraction of thousands of similar coins, most of which spike in value before quickly fading from public attention. Just harmless jokes. But Squid Game Coin was different — when you combine dishonest founders, a wildly popular TV show, and the wide world of crypto, you get a recipe for disaster.
Red Flags
The scandal began on October 26 last year, when the coin’s founders released a whitepaper (information brochure) about the coin, complete with graphics and Korean embellishments that appeared real. But it was far from official, filled with spelling and grammatical mistakes. What’s more, the workings of the game sounded very much like that of a pyramid scheme — “The more people join, the larger [sic] reward pool will be”, it promised.
Even the marketing section was much too confident, claiming that “most major communities in telegram will discuss about SQUID and influencers will participate in our games since we planned to cooperation [sic] with more than 200 communities and 100 influencers”. As expected, not a single influencer promoted or even played the game. The game didn’t exist. The developers even thought to include a page on selling — saying that one needed to own an affiliated coin (MARBLES) to have the right to sell, and that anyone who tried to add liquidity (more on that later) would be ‘punished’.
Basically, all the signs were pointing to Squid Game Coin being a scam. And yet people continued to buy it, with no end in sight.
How it happened
SQUID’s rise in price was sporadic, to say the least. Over the span of just a few days, investors’ funds grew twofold, threefold, then fourfold — eventually rising by more than a million percent, turning even a few hundred dollars into millions. The only problem? Nobody could sell. When trying to exchange their SQUID tokens for a more stable cryptocurrency, everyone was met with an error message. This was because the founders had, quite literally, turned off the ability to sell the coin in its code. Without anyone being able to sell, it was no surprise that SQUID never decreased in price.
The only problem? Nobody could sell.
News of this quickly spread throughout the internet, to the point where nearly every crypto-tracking company posted notices warning that SQUID was likely a scam. But it was too late. Spreading even faster was news of the coin’s unprecedented rise in price and popularity, with major outlets like the BBC, CNN, and Business Insider writing about the coin but failing to mention that it was not affiliated with Netflix. As a result, more people were enticed into buying SQUID — at its peak, the coin rose more than a hundredfold in four hours, bringing its total value to about $2 trillion USD — more than all other cryptocurrencies combined, including Bitcoin.
That was until it dropped to zero within seconds.
The Scam
In financial terms, what happened to Squid Game Coin is called a ‘rugpull’. Rugpulls occur when the developers of a cryptocurrency sell all their tokens, leaving no liquidity remaining and causing the cryptocurrency’s price to fall to zero. For reference, liquidity is the amount of money in a so-called liquidity pool that investors can use to buy or sell assets instantly. Here’s a flowchart to explain the concept a little more:
Take it like this — say you want to exchange some BNB (Binance Coin), which is another cryptocurrency, for SQUID — where would your newly-gotten SQUID come from, and who would you give your BNB to? The answer is the coin’s liquidity pool: you send your USD there, BNB gets added to its balance, and it sends you SQUID back, depleting the amount of SQUID left in the pool. As a result, the ratio of BNB to SQUID changes, prompting the exchange to automatically increase SQUID’s price. Simple.
However, all the money in SQUID’s liquidity pool was provided by the founders themselves.
On 1 November, the founders sold all their SQUID and emptied the entire liquidity pool, causing its price to drop to zero while the scammers took off with over $3 million.
If the total value of SQUID was over $2 trillion, you may ask, why did the founders only get $3 million? That’s because it’s impossible to sell more than what’s in the liquidity pool — if their holding’s value was $1 trillion, for example, and there was only $3 million in the pool, where would the remaining money come from? The only way to do this would be to lower the coin’s price significantly to accommodate for such a large order.
The aftermath
Thousands were left devastated by this scam — overnight, their fortunes vanished while the founders emerged as millionaires.
One Shanghai investor even lost his entire life savings of $28,000 to Squid Game Coin. He, amongst many others, quickly contacted the FBI, CIA, and any other authority he could think of — but to no avail.
After all, it would be extremely difficult to find the conmen, let alone recover trillions of lost funds. Still, the biggest cryptocurrency exchange, Binance, has taken matters into its own hands — it is currently investigating the matter and is dedicating millions to the search for SQUID’s founders, but only time will tell if they will be caught.
Ultimately, Squid Game Coin is only one of many similar scams in the crypto world, but has done more to make others lose trust in the industry than any other cryptocurrency (except perhaps BitConnect). Yet, the debacle reveals a number of lessons we can learn, regarding the power of the fear of missing out, false marketing, and the importance of doing your own research — all of which hold true for nearly every aspect of our lives.
